Question

Give the general journal entries to record the following transactions: On December 31, 2020, Bay Co. established a bond sinking fund investment by depositing $20,000 with the fund trustee. On December 31, 2021, Bay Co. recorded $1,000 net income from its bond sinking fund investment for the year. On December 31, 2022, Bay Co. made a deposit of $10,000 into the bond sinking fund investment.

Answer 1

To set up a T-account balance sheet for the bank, list the assets (reserves, government bonds, and loans) and the liabilities (deposits). Subtract liabilities from assets to calculate the bank's net worth, which in this example is $220.

Step-by-step explanation:

The question requires setting up a T-account balance sheet for a bank. The assets of the bank include its reserves, government bonds, and loans made to customers, while the liabilities are the deposits made by the bank's customers.

To calculate the bank's net worth or equity, the total value of assets is subtracted from the total value of liabilities.

Bank T-Account Balance Sheet

• Assets
  • Reserves: $50
  • Government Bonds: $70
  • Loans: $500
• Liabilities
  • Deposits: $400

The next step is to calculate the net worth, which is Assets - Liabilities = (50 + 70 + 500) - 400 = $620 - $400 = $220. Therefore, the bank's net worth is $220.